U.S. will go over the fiscal cliff and markets will force a deal: Nouriel ‘Dr. Doom’ Roubini

Keeping to his nickname of “Dr. Doom” after he foretold of the 2008 financial crisis, economist Nouriel Roubini said Friday he expects the U.S. to fall off the fiscal cliff.

Referring to the combination of tax hikes and spending cuts facing the U.S. on Jan. 1 under current federal law, Roubini said “I think there’s a highly likely chance we’re going to go over the cliff.”

But it won’t be all bad, said Roubini, a professor of economics at New York University and chairman of Roubini Global Economics.

“If we do so, the market reaction is going to force the two sides to reach an agreement,” he said in an interview on Bloomberg TV.

Switching back to his gloomy ways, Roubini added that even with an agreement on Capitol Hill, the U.S. will face a roughly 1.4% headwind on gross domestic product related to fiscal and tax policy surrounding the fiscal cliff.

But even with that hardship, Roubini said the U.S. is faring better than other nations.

“In the long term, I think that the fundamentals of the U.S. are a lot stronger than other advanced countries,” he said. “In the short run, I think we will have another year of very anemic economic growth. Next year we will have barely 1.7% including a modest amount of fiscal drag and lots of tail risk could make it worse in the U.S — bigger fiscal cliff, the euro-zone crisis, a Chinese hard landing, maybe tensions will raise oil prices in the Middle East — so the downside scenario is actually having a meaningful probability.”

Asked if he would accept the job as U.S. Treasury secretary, Roubini he doesn’t expect President Barack Obama to tap him for the post.

“He is not going to call me,” Roubini said. “As a public intellectual, I can provide input to the debate where I am now.”

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